Friday, May 09, 214: GE, a diversified manufacturing and infrastructure conglomerate, has invested millions of rupees in the Indian energy space. Banmali Agrawala, president and CEO, GE South Asia, says that the company has a long term target for India. In a conversation with Srabani Sen of Electronics Bazaar, he talks about the issues faced by the manufacturing sector and the policy changes that he would like to see the government initiate. “We are optimistic about India and see plenty of opportunities for growth in all our businesses,” he says.
EB: GE has been doing business in India for over 100 years. How is the company helping to strengthen the manufacturing ecosystem in India?
We have been setting up manufacturing facilities in India, so we certainly do a lot of sourcing from ancillary units nearby. We encourage and support them to improve their quality and maintain standards at par with global standards because we feed into a global supply chain. That is how we try to help the ecosystem.
EB: Are these manufacturing facilities for electronics?
No, they are for a host of other components that require electronics—for healthcare, aviation, power generation, etc.
EB: Does GE manufacture electronics in India?
We do not manufacture but buy electronics in India.
EB: Is GE a part of any of the government’s manufacturing clusters or has it invested in any of the government schemes?
No, we are not a part of any government cluster. GE is coming up with a large multi-modal facility in Pune, so in total it makes it 13 manufacturing units across the country. We are spending US$ 200 million in the Pune facility for which we have signed an agreement with the Maharashtra government. Here we will manufacture a range of products, including wind turbines, control systems and healthcare products. The idea is to get scale at one location rather than having many small units. We are hopeful that our manufacturing facility will play a significant role in enabling India transform into a robust manufacturing hub. The next shift would be to manufacture components here in India—components that will be relevant to the Indian market. In India, the cost of capital is high and the cost of labour is relatively low. We also want to make India the base for our exports.
EB: What is your opinion on the two fabs that have been approved by the Cabinet?
I believe it is a very significant step taken by the government. These fabs will help boost electronics manufacturing in India immensely. India can now compete with other manufacturing countries.
EB: Domestic companies want a level playing field and are asking for higher subsidies. What are your comments on this?
Well, I would urge the government to give more subsidies and tax benefits to domestic companies. India doesn’t have the volumes for viable manufacturing, yet. If we look at the competing countries, they have the volumes; hence they have achieved high levels in manufacturing. Scale is not going to happen overnight, so I think the government needs to do something to offer more support till domestic electronics manufacturers achieve high volumes. If that doesn’t happen, then it is going to be tough for the industry to scale up overnight. And it is going to be difficult for the Indian electronics industry to compete with other countries in the world.
The government needs to get manufacturing moving. The huge challenge of unemployment will also get resolved through manufacturing. For manufacturing to thrive and flourish there has to be a sizeable and substantial domestic market. We can supplement that market with exports, but it is very difficult to base one’s manufacturing strategy entirely on exports. Also, the government needs to create a climate by which investments actually happen and I’m not talking of only FDI here. We don’t need to do anything special for FDI if the general investment atmosphere is right.
EB: You have recently taken over as the head of GE in India. How has the experience been so far?
To be responsible for GE in India and South Asia is a great opportunity. To have been chosen to make a difference in India on such a scale is an exhilarating feeling.
EB: How has GE’s growth in India been during the last three years?
During the last three years, GE has grown faster in the emerging markets like India, and we have a long term perspective for India. Our achievements here have been dramatic. We have ramped up the quality of our team by bringing in people with domain knowledge. We have also given a huge thrust to make products locally for India and for the rest of the world. We want to see India become a manufacturing hub.
EB: What, according to you, needs to be done, for India to become a manufacturing hub?
I think it is purely a matter of economies of scale. If the volumes are large enough, companies would not hesitate to manufacture in India. But now, the volumes aren’t enough to justify full-fledged manufacturing. So companies have to fall back on exports. There, too, one has to be competitive enough to export, in relation to other countries.
The government needs to take certain policy decisions faster. Otherwise, it will be tough for India to become a manufacturing hub and grow faster. Imposing duty barriers on the import of equipment is the right way to develop the economy. If a foreign country is dumping in India, the government has to protect the country against it. This will help local manufacturers a lot. But if the government tries to curtail genuine competition by imposing duties, it will hurt the domestic economy.
If domestic manufacturing is to be boosted, it has to be made attractive with more subsidies and tax benefits. It cannot be made attractive by not allowing exports. The government should offer support to increase the demand for electronics, as Indian volumes alone are not sufficient to support large-scale manufacturing facilities. So, India will still end up importing a good amount of components and manufacturers will continue to do just a minimal amount of tinkering here to claim their products are ‘local’, unless the government supports them.
EB: What are GE’s plans in the solar sector?
From a manufacturing point of view, the solar market is going through a major upheaval. All the big manufacturers of solar equipment are going through a very difficult phase from the financial point of view. GE has put its thin film solar panel projects on hold for some time. At the moment, there is a lot of over-capacity in the solar panel market. There is also the question of tariff rates. There has to be some upward revision in tariffs to bring about a revival in the manufacturing space.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine
